A week after Elon Musk finalized a $ 44 billion deal to buy Twitter, the billionaire is working to secure outside funding for the acquisition, which would bind less than his personal wealth.
The world’s richest man is in talks with major investment firms and high-net worth individuals to seek more funding, Reuters reported on Monday. Although Musk has an estimated net worth of about $ 245 billion, much of his fortune is tied to equities.
Tesla’s chief executive revealed last week that he had sold $ 8.5 billion worth of shares following his agreement to buy Twitter. Additional funding, which could come in the form of preferred or ordinary equity, could reduce the $ 21 billion cash contribution Musk has committed to the deal, as well as a margin loan he has secured against his shares in Tesla, sources said. familiar with the Reuters issue.
Banks, which agreed last month to provide $ 13 billion in loans based on Twitter’s business, have refrained from offering more debt to Musk due to limited cash flow from the San Francisco-based company, Reuters reported last month.
Musk also pledged part of his stake in Tesla to banks to arrange a $ 12.5 billion margin loan to help fund the deal. He may seek to reduce the size of the loan margin based on the interest of new investors in financing the deal, said one source.
Large investors such as private equity firms, hedge funds and high-net worth individuals are in talks with Musk to provide preferred equity financing for the acquisition, sources said. The preferred capital will pay a fixed dividend from Twitter, in the same way that a bond or loan pays regular interest, but will increase according to the value of the company’s equity.
Apollo Global Management Inc and Ares Management Corp are among the private equity firms that are negotiating funding, the sources added.
Musk is still deciding whether there will be partners to team up with him to write the equity test needed for the deal, sources said. Musk is not seeking to take on more debt for the Twitter deal at the moment, sources added.
Musk is also in talks with some of Twitter’s major shareholders about the possibility of them investing in the deal instead of cashing in, one source said. Movable share includes the sale of the majority of the shares in the company, while maintaining a minority share. Former Twitter CEO and current board member Jack Dorsey is investigating whether to pass on his opinion, a source added.
Large institutional investors, such as Fidelity, are also in talks to transfer their stake, according to the source. Musk tweeted that he would try to keep as many investors on Twitter as possible because he was making the company private.
Sources requested anonymity as the matter is confidential. Musk, Dorsey, Fidelity, Apollo and Ares did not respond immediately to requests for comment.
Investors are worried that Musk will close the deal with Twitter, given that he has withdrawn in the past. In April, he decided at the last minute not to take a seat on Twitter. In 2018, Musk tweeted that he had “secured funding” for a $ 72 billion deal to make Tesla private, but did not continue with an offer.
Musk will have to pay a $ 1 billion fee to end Twitter if he withdraws, and social media company may also sue him to complete the deal.
Shares of Twitter rose 1.2% to $ 49.63 in Monday afternoon trading in New York, closer to a share price of $ 54.20 as investors interpreted the news of the new financing as greater security for the completion of the transaction.
On Monday, the social media company said in documents that fake or spam accounts accounted for less than 5% of its active users, who could earn revenue in the first quarter.
The company had 229 million users served in the first quarter. The revelation came days after Musk tweeted that one of his priorities would be to remove spam bots from the platform.
Twitter said in the documentation that it faces several risks while the deal with Musk is completed, such as whether advertisers will continue to spend on Twitter and “potential uncertainty about our future plans and strategy.”
Musk, who calls himself an absolutist of free speech, criticized Twitter’s moderation policies. He wants Twitter’s tweet prioritization algorithm to be public and opposes giving too much power over the service to the corporations they advertise.
Reuters contributed to this report.
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